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Today, the Federal Communications Commission’s broadcast indecency policy received, at most, a glancing blow from the U.S. Supreme Court. 

In a sharply limited decision, the Court, by an 8-0 vote (with Justice Sotomayor not participating) and for the second time since 2009, avoided difficult First Amendment questions about the FCC’s authority to restrict coarse language and nudity on broadcast television. In 2009, the Court held that the FCC’s adoption of the so-called “fleeting expletives” policy for broadcast indecency was neither arbitrary nor capricious in violation of the Administrative Procedure Act. This time, in  Federal Communications Commission, et al. v. Fox Television Stations, Inc., et al, the Court found that this policy, as applied to Fox and ABC, was impermissibly vague in violation of these broadcasters’ due process rights. The Court did not reach the First Amendment issues, choosing instead to vacate and remand the decisions of the 2nd Circuit that struck the FCC’s broadcast indecency policies on First Amendment grounds.

The Fox and ABC cases, which I’ve written about previously, involved challenges brought by broadcasters to the FCC’s broadcast indecency regulations. The broadcasters argued, among other things, that the Court should overturn its precedent in FCC v. Pacifica Foundation granting the FCC limited authority under the First Amendment to regulate broadcast indecency. While the Court today left the First Amendment issues open, Justice Kennedy, writing for the Court, found instead that the FCC “failed to give Fox or ABC fair notice prior to the broadcasts in question that fleeting expletives and momentary nudity could be found actionably indecent.” As a result, according to the Court, the FCC’s policy was impermissibly vague with respect to the broadcasts at issue here. In a brief concurring opinion, Justice Ginsburg wrote that “[t]ime, technological advances, and the Commission’s untenable rulings in the cases now before the court show why Pacifica bears reconsideration.”

Some initial observations:

1)      The FCC’s “Fleeting Expletive” Policy Still Exists. The decision explicitly does not address the constitutionality of the FCC’s current indecency policy “as expressed in the Golden Globes Order [issued March 18, 2004] and subsequent adjudications.” This Order adopted the “fleeting expletives” policy and apparently remains in force. The Court found that the FCC remains “free to modify its current indecency policy in light of its determination of the public interest and applicable legal requirements.”

2)      Timing of the Alleged Violation Is Critical.  The Fox and ABC broadcasts occurred prior to March 18, 2004. According to the Court, “the Commission policy in place at the time of the broadcasts gave no notice to Fox or ABC that a fleeting expletive or a brief shot of nudity could be actionably indecent; yet Fox and ABC were found to be in violation.” As a result, timing of a disputed broadcast is critical for purposes of determining the precedential effect of this decision on other cases.

3)      The decision is limited in scope on indecency. The Court treated “fleeting expletives and fleeting nudity” as part of the same FCC policy articulated in the 2004 Golden Globes Order. This determination enabled the Court to dispose of both cases via the same vagueness rationale, thus avoiding the First Amendment issues.

4)      The Court’s decision gives clues on how it could rule on the Janet Jackson case. The opinion does not address the FCC’s pending Petition for a Writ of Certiorari from the U.S. Supreme Court in connection with the Janet Jackson “wardrobe malfunction” case. The FCC is seeking review of a decision by the U.S. Court of Appeals for the 3rd Circuit, which found that the Commission acted arbitrarily and capriciously, in violation of the Administrative Procedure Act, when it fined CBS stations for violating the indecency policy. The FCC requested that its petition “should be held for [the Fox case] and then disposed of as appropriate in light of the Court’s decision.” In this regard, like the broadcasts for ABC and Fox in today’s decision, the Janet Jackson broadcast occurred prior to the March 18, 2004 release of the 2004 Golden Globes Order. As a result, “fair notice” is again at issue, particularly now that the Court has explicitly determined that the Commission’s policy extends to “fleeting nudity.” Given that the nudity depicted in NYPD Blue lasted about seven seconds and the "wardrobe malfunction" was clocked at less than one second, the Commission should have concerns about the impact of today's ruling on the Janet Jackson case.

5)      Processing the backlog of indecency complaints is a priority.  Big practical issues remain. For example, the FCC has a massive backlog of indecency complaints filed against broadcasters.  Such complaints often slow processing of applications and delay the closing of transactions. For now, observers must watch and wait to see how the FCC decides to proceed.  Expect the FCC to comb through the backlog of complaints and dismiss those cases built on “fleeting expletives” with respect to broadcasts that occurred prior to March 18, 2004.  The FCC could take the opportunity to dismiss those complaints that it deems to not implicate the agency’s current indecency policy.

In light of these developments, don’t expect the floodgates to open for the broadcast of coarse language or brief nudity on your local station any time soon. There are significant questions about how the Commission will enforce its indecency policies going forward. The hardest questions on broadcast indecency and the First Amendment will continue to be debated, but there’s every reason to expect that one day the Court will be asked to address them yet again.  In the meantime, stay tuned.

Disruption does not occur in a vacuum. Recently Henry Blodget and Dan Frommer considered whether technological disruption may lead to the "collapse" of the television industry given the recent track record of the newspaper industry. The debate centers on TV viewers’ changing habits, and the Internet, new video providers (e.g., Hulu, Netflix and iTunes) and non-TV displays (e.g., smartphones and tablets) factor heavily into this debate. Technology has enhanced time-shifting, and viewers watch much less programming live (or nearly live) or via a traditional TV.  Some viewers replace linear program streams with on-demand viewing. Reasonable minds can differ on the ramifications of these changes. What this debate lacks, however, is a thorough assessment of the role that the legal systems play in this heavily regulated space – systems that, for better and for worse, can limit and delay industry-wide disruptions. 

Video programming markets exist within an expansive, multilayered regulatory structure that shapes the options available to viewers. The structure affects access to programming, access to distribution facilities, the terms and conditions of programming rights and other aspects of production and distribution. While Blodget sees vulnerability in the network model amid alternative means for production, acquisition and distribution, Frommer argues that changes in the TV industry will “happen a lot slower than you think” due to factors such as network bundling contracts and carryovers of cable bundling to the Internet. Program suppliers (whether network or syndicated), broadcasters, cable operators, Internet-based video service providers and others compete in this marketplace, but Federal policy also plays a significant role.

Blodget and Frommer focus on the rise and viability of new à la carte competitors to traditional broadcast, cable and satellite providers. These outlets provide a variety of programming, but such providers have differing levels of bargaining power and must compete to negotiate for programming rights. These providers lack certain regulatory benefits available to cable and satellite companies. Federal law assigns certain rights (and certain burdens) to "multichannel video programming distributors," or MVPDs. To date, the Federal Communications Commission has declined to extend this definition to a category of providers that it calls “Online Video Distributors” (OVDs) which include providers such as Netflix, Hulu and others. In a pending proceeding, the FCC has sought public comment on the definition of “MVPD” due to the wide-ranging policy implications.

An MVPD classification gives a provider certain regulatory benefits with respect to access to programming. For example: 

• Under federal program access rules, among other things, cable-affiliated programmers must make their programming available to MVPDs on nondiscriminatory rates, terms and conditions. Classification issues, however, will impact the universe of parties in the marketplace. An “over-the-top” video provider, Sky Angel, filed a program access complaint against Discovery Communications and Animal Planet in a dispute over a terminated affiliation agreement. Although the complaint remains pending, in its initial ruling, the FCC's Media Bureau found that Sky Angel was not an MVPD because it did not provide subscribers with a transmission path. Extension of MVPD status to such providers would represent a dramatic change in the regulatory regime.

• Federal law provides, with limited exceptions, that no MVPD may retransmit the signal of a broadcast station without the station’s express authority.  Every three years, commercial broadcasters must contact their local MVPDs and must elect whether to have their broadcast signals carried by those operators in accordance with a retransmission consent agreement or to invoke statutory rights of mandatory carriage. In addition, FCC rules require MVPDs to honor broadcasters’ exclusivity rights with respect to certain network, syndicated and/or sports programming. At present, only MVPDs are eligible to seek relief from the FCC to resolve disputes with broadcasters over these rights. Again, definitions matter.

Even non-MVPDs have benefitted from FCC actions to stimulate access to programming by OVDs.  The FCC's approval of Comcast/NBCU joint venture involved several conditions designed to facilitate access by OVDs to programming owned by the joint venture. While the FCC may lack explicit statutory authority to mandate such access, if FCC approval is required for a specific transaction, the agency sometimes requires the transacting parties to adhere to behavioral, structural or other conditions to get such approval. The Commission’s actions in the context of Comcast/NBCU and the Sky Angel case are introductory steps, potentially toward addressing more significant changes down the road.

Of course, access to programming also requires consideration of the benefits and burdens of copyright laws. The Copyright Act grants copyright holders limited bundles of rights to their works, such as rights to perform their copyrighted works in public (which includes broadcast programming and retransmission of such programming on MVPD networks), rights to preclude others from making public performances of these works and rights to reproduction of those works. Qualifying MVPDs can obtain compulsory or statutory licenses to retransmit certain video programming without having to negotiate with many individual copyright holders whose programs are included in the video stream. Copyright law issues are front and center in a legal challenge brought by broadcasters against the launch of Aereo’s subscription-only Internet service. Aereo plans to offer subscribers specific bundles of broadcast network programming for a fee. The networks assert that Aereo’s service constitutes copyright infringement and argue that while other providers pay fees to license the content, Aereo does not. Once again, legal definitions and regulatory uncertainty over emerging technologies affect access to programming.

Notice that I’ve focused only on certain regulations involving access to programming. A much longer blog post would deal with other important regulatory structures: for example, media ownership, access to network facilities, local video franchising, equipment regulation and the regulator’s role in dispute resolution.  More regulation translates into regulatory uncertainty (for example, over definitional issues), higher transaction costs, more litigation and more intensive lobbying. The lesson here is that the government regulates the video programming industry much more heavily than the newspaper industry, so it’s difficult to translate the problems facing the latter into predictions about the viability of the former.

So between Henry Blodget and Dan Frommer, who’s right about whether the TV business is “starting to collapse”? I see that as a false choice given the unpredictability of this rapidly changing marketplace. The pace of change on the Internet can be dramatic, but where regulation and litigation are involved, the pace can turn glacial. Thanks in part to the legal system, I don’t expect the “TV business” to “collapse” but rather to continue to evolve incrementally, with competition, new and disruptive technologies and government action serving as major drivers.